What Credit Score Do You Start With, and How Can You Establish Credit?
Understanding your starting credit score can help you develop a roadmap for improvement.
Contributing Writer at Tally
October 21, 2022
Credit score is based on complex calculations that are complicated to understand. Things are muddled from the beginning of your credit score journey.
What credit score do you start with? Does credit score start at zero and rise from there? Does it start at a perfect score and drop if you have a financial misstep? The answer falls somewhere in between.
Below, we'll cover:
The credit score you start with
What factors impact score
How fast you can build credit
What you can do to establish credit for the first time
What credit score do you start with?
It's logical to think your credit score starts at the bottom and grows as you build credit history, but this isn’t the case. Once you establish credit, you will start with a credit score between 300 and 850, depending on how you handle your account once it’s opened.
Once you open one or more new credit accounts and start using them, you’ll generate a credit history, determining your starting credit score. There is no default starting point, and your first credit score can range from 300 to 850. Where you start depends on a variety of credit scoring factors.
What factors impact your credit score?
Your credit score is based on your credit report from each of the three major credit bureaus: Experian, Equifax and TransUnion. Your credit report is a rundown of your credit accounts from the past seven to 10 years.
Your score is based on five key factors:
Payment history considers whether you pay your credit accounts within 30 days of the due date. Payments more than 30 days late may result in a credit score drop.
Credit utilization is the second most important factor in your FICO Score is credit utilization. This factor looks at your available credit relative to your overall credit limit. If your credit utilization ratio exceeds 30%, meaning that you are using more than 30% of your total credit, you may see a dip in your credit score.
Length of your credit history weighs the average age of all your credit accounts combined and the age of each account. The older your average account age, the more positively it impacts your credit score. If you open a new account or close an older account, you may see a small decrease in your credit score.
Credit mix is the balance of different types of credit on your report, including credit cards, lines of credit, retail credit accounts and installment loans. If you have several types of credit, it can improve your credit score.
New credit factors in new credit accounts and hard inquiries in the past 12 months. You may see a slight credit score decrease if you open multiple new accounts or have several new credit inquiries on your credit report within a year.
What credit score does an 18-year-old start with?
None of the three credit bureaus automatically create a credit report when you turn 18. Instead, you need to open a credit account to establish a credit file and receive a credit score. Minors could potentially have a credit score if their parents opened a credit card in their name, perhaps as an authorized user. They may also have a score if they were the victim of identity theft and someone opened a fraudulent account in their name.
What is your credit score when you have no credit?
You do not have a credit score unless you have a credit history. Your credit score indicates your creditworthiness to lenders. There is no creditworthiness to measure if you don’t have a credit file. When you have no credit history, your file will indicate something like “insufficient information,” and there will not be a credit score associated with your name.
How fast can you build credit?
Primarily, there are two different types of credit scores — FICO Score and VantageScore. How quickly you can build credit once you open your first credit account depends on the credit score type.
You'll generally need at least six months of credit history to establish your first FICO Score. But your first VantageScore can generate more quickly, usually as soon as you have an account on your credit report.
After that, it can take anywhere from one month to 10 years to improve your credit score, depending on your credit history.
How can you establish credit if you don’t yet have a credit score?
Establishing a credit score can present a few challenges. Namely, you need a credit account in your name to build a credit score, but you usually need a credit score to get approved for credit accounts. This can leave you wondering where to start.
Fortunately, there are several options to establish credit.
Getting a secured credit card
A secured credit card is a traditional credit card with one key difference: You must pay a security deposit. This refundable security deposit is generally the same amount as your credit limit. It protects the credit card issuer if you fail to repay your debt.
With a secured credit card, you pay the security deposit before receiving the card. The credit card issuer places the deposit in an account and uses it only if you default on the credit card. You can use a secured card like a credit card.
Secured credit cards are helpful when building credit, but they come with a few downsides:
The security deposit may be too large for you to pay upfront
Secured credit cards often have an annual fee
If the credit limit is low, the annual fee may take up a large portion of the limit
Becoming an authorized user
As an authorized user, you become a secondary account holder on a credit card. You’ll receive a credit card attached to the account in your name, but you can’t make changes to the account, such as requesting a credit limit increase.
Your credit report will include the credit card when you're an authorized user. This places an established credit account on your credit report, which may help build and improve your credit score.
However, if the primary cardholder doesn’t use the card responsibly or makes a late payment, you may see your credit score drop.
Taking out a credit-builder loan
A credit-builder loan is a small installment debt. The money is placed in a savings account. You then make payments. Once you pay off the loan, the lender releases the funds to you.
By making on-time payments to the lender, you establish credit and potentially improve your credit score.
Taking out a student loan
If you're a college student or taking courses, a student loan can establish credit. Lenders don’t require credit checks for most federal student loans. Once you start repaying your loans after graduation, you can establish and improve your credit score.
Getting a cosigner
To establish your credit through a traditional installment loan, like an auto loan or personal loan, a cosigner can help. Although a cosigner may not make the monthly payments, they share the financial responsibility of the loan with you.
With the cosigner's good credit, a lender may approve you for a loan, even if you have no credit. After making on-time payments, you'll establish and build your credit score.
If the cosigner has bad credit, you may not get approved. Also, if you make late payments or default on the loan, it may negatively impact the cosigner's credit.
What is a good credit score?
Your credit score will fall between 300 and 850, but what is considered a good credit score? For FICO Scores, a good credit score is 670 or higher and an excellent credit score is 800 or higher. For VantageScore, a good credit score starts at 700, and an excellent credit score starts at 750.
The FICO credit score ranges are:
580 or less: Poor credit
580-669: Fair credit
670-739: Good credit
740-799: Very good credit
800 and up: Excellent credit
The VantageScore ranges are:
300 to 549: Very poor credit
550 to 649: Poor credit
650 to 699: Fair credit
700 to 749: Good credit
750 to 850: Excellent credit
Where can you check your credit report and score?
Federal law requires Experian, Equifax and TransUnion to offer every American one free credit report per year. You can obtain a free copy of your credit report from AnnualCreditReport.com, but it doesn't include your credit score. Places where you can find your free credit score include your financial institution, your loan statement or your credit card statement.
You start somewhere — just not at zero
What credit score do you start with?
When you begin building credit, your credit score doesn't start at zero. Instead, it lands somewhere between 300 and 850 depending on various factors, including how you manage your credit accounts.
Starting with a clean credit report is an opportunity to build a solid base for your finances. However, without a credit history, you may find it challenging to be approved for the accounts you need to establish a credit score.
Fortunately, there are some things that you can do to build a credit score, including:
Becoming an authorized user
Taking out a secured credit card
Using a credit-builder loan
Taking out a student loan
Using a cosigner to get a traditional loan
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